<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Strayer Education, Inc.
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(Name of Registrant as Specified in Its Charter)
Strayer Education, Inc.
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
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<PAGE> 2
STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of Strayer Education, Inc., a Maryland corporation, to be held at 10:00 a.m.
local time on May 19, 1997, at the Hyatt Regency Crystal City, 2799 Jefferson
Davis Highway, in Arlington, Virginia.
The matters to be considered at the meeting are described in the
accompanying Proxy Statement. Regardless of your plans for attending in person,
it is important that your shares be represented at the meeting. On behalf of the
Board of Directors, I urge you to please complete, sign, date and return the
enclosed proxy card in the enclosed stamped envelope. Signing this proxy will
not prevent you from voting in person should you be able to attend the meeting,
but will assure that your vote is counted, if, for any reason, you are unable to
attend. If you wish to give a proxy to someone other than the persons named on
the enclosed proxy form, you may cross out their names and insert the name of
some other person who will be at the meeting. The signed proxy form should be
given to that person for his or her use at the meeting. If your shares are held
in the name of a broker, you should obtain a letter of identification from your
broker and bring it to the meeting. In order to vote personally shares held in
the name of your broker you must also obtain from the broker a proxy issued to
you.
We look forward to seeing you at the 1997 Annual Meeting of Stockholders.
Sincerely,
/s/ RON K. BAILEY
Ron K. Bailey
President
April 11, 1997
<PAGE> 3
STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
The 1997 Annual Meeting of Stockholders of Strayer Education, Inc., will be
held at the Hyatt Regency Crystal City, 2799 Jefferson Davis Highway, in
Arlington, Virginia, on May 19, 1997, at 10:00 a.m. for the following purposes:
1. To elect nine (9) directors to the Board of Directors to serve for
a term of one year and until their respective successors are
elected and qualified.
2. To consider and act upon an amendment to the Corporation's Articles
of Incorporation increasing the authorized number of shares of
common stock from 20,000,000 to 50,000,000.
3. To consider and act upon such other business as may properly come
before the meeting.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE REQUESTED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN THE
ENCLOSED STAMPED ENVELOPE.
By Order of the Board of Directors
/s/ GLENDA S. HARDISON
Glenda S. Hardison
Secretary
Washington, D.C.
April 11, 1997
<PAGE> 4
STRAYER EDUCATION, INC.
1025 FIFTEENTH STREET, N.W.
WASHINGTON, D.C. 20005
(202) 408-2424
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1997
This Proxy Statement is furnished on or about April 11, 1997, to
stockholders of Strayer Education, Inc. (the "Corporation"), 1025 Fifteenth
Street, N.W., Washington, D.C. 20005, in connection with the solicitation by the
Board of Directors of the Corporation of proxies to be voted at the 1997 Annual
Meeting of Stockholders (the "Annual Meeting"). The Annual Meeting will be held
at 10:00 a.m. local time on May 19, 1997, at the Hyatt Regency Crystal City,
2799 Jefferson Davis Highway, in Arlington, Virginia.
The cost of soliciting proxies will be borne by the Corporation. Copies of
solicitation material may be furnished to brokers, custodians, nominees and
other fiduciaries for forwarding to beneficial owners of shares of the
Corporation's Common Stock, and normal handling charges may be paid for such
forwarding service. Solicitation of proxies may be made by the Corporation by
mail or by personal interview, telephone and telegraph by officers and other
management employees of the Corporation, who will receive no additional
compensation for their services.
Any stockholders giving a proxy pursuant to this solicitation may revoke it
at any time prior to exercise of the proxy by giving notice of such revocation
to the Secretary of the Corporation at its executive offices at 1025 Fifteenth
Street, N.W., Washington, D.C. 20005, or by attending the meeting and voting in
person.
At the close of business on April 4, 1997, there were 9,450,000 shares of
the Common Stock of the Corporation outstanding and entitled to vote at the
meeting. Only stockholders of record on April 4, 1997, will be entitled to vote
at the meeting, and each share will have one vote.
VOTING INFORMATION
At the Annual Meeting votes will be counted by written ballot. A majority
of the shares entitled to vote will constitute a quorum for purposes of the
Annual Meeting. The election of the Board of Directors' nominees for directors
will require the affirmative vote of a plurality of the shares present in person
or represented by proxy and entitled to vote in the election of directors.
Approval of the proposed amendment to the Corporation's Articles of
Incorporation and any other business which may properly come before the Annual
Meeting, or any adjournments thereof, will require the affirmative vote of a
majority of the shares present in person or represented by proxy and entitled to
vote thereon. Under Maryland law and the Corporation's Articles of Incorporation
and By-laws, the aggregate number of votes entitled to be cast by all
stockholders present in person or represented by proxy at the Annual Meeting,
whether those stockholders vote "For", "Against" or abstain from voting, will be
counted for purposes of determining the minimum number of affirmative votes
required for approval of such matters, and the total number of votes cast "For"
each of these matters will be counted for purposes of determining whether
sufficient affirmative votes have been cast. An abstention from voting on a
matter by a stockholder present in person or represented by proxy at the meeting
has the same legal effect as a vote "Against" the matter even though the
stockholder or interested parties analyzing the results of the voting may
interpret such a vote differently. Broker non-votes will have the effect of
reducing the number of shares considered present and entitled to vote on the
matter.
A stockholder may, with respect to the election of directors, (i) vote for
the election of all named director nominees, (ii) withhold authority to vote for
all named director nominees or (iii) vote for the election of all named director
nominees other than any nominee with respect to whom the stockholder withholds
authority to vote by so indicating in the appropriate space on the proxy card.
<PAGE> 5
Proxies properly executed and received by the Corporation prior to the
meeting and not revoked, will be voted as directed therein on all matters
presented at the meeting. In the absence of specific direction from a
stockholder, proxies will be voted for the election of all named director
nominees. If a proxy indicates that all or a portion of the shares represented
by such proxy are not being voted with respect to a particular proposal, such
non-voted shares will not be considered present and entitled to vote on such
proposal, although such shares may be considered present and entitled to vote on
other proposals and will count for the purpose of determining the presence of a
quorum.
PROPOSAL I
ELECTION OF DIRECTORS
Nine directors are to be elected. It is intended that the votes represented
by the proxies will be cast for the election as directors (for a term of one
year or until their successors are chosen and qualified) of the persons listed
below. Each of the nominees is currently a director of the Corporation.
The following table presents information concerning persons nominated for
election as directors of the Corporation, including their current membership on
committees of the Board of Directors, principal occupations or affiliations
during the last five years and certain other directorships held.
NOMINEES FOR DIRECTORS
Ron K. Bailey.............. Member -- Executive Committee. Mr. Bailey, age 56,
is the President and Treasurer of the Corporation.
Mr. Bailey has been the President and a trustee of
Strayer College, Inc. (the "College"), a subsidiary
of the Corporation, since 1989 and the President
and a director of Education Loan Processing, Inc.
("ELP"), the other subsidiary of the Corporation,
since its formation in 1994. From 1980 to 1989, Mr.
Bailey held a variety of administrative positions
with the College, including the position of Vice
President of the College. Before assuming his first
full-time position with the College in 1980, Mr.
Bailey was a part-time faculty member of the
College and served as Director of Data Processing
of the National Association of Home Builders.
Stanley G. Elmore.......... Member -- Executive Committee. Projects and
Programs Manager, Citibank Mid-Atlantic, since
1989. Mr. Elmore, age 55, has been a director and
Chairman of the Board of Directors of the
Corporation since July 1996. Mr. Elmore has been
the Chairman of the Board of Trustees of the
College since 1989.
Todd A. Milano............. Member -- Compensation Committee. President and
Chief Executive Officer of Central Pennsylvania
Business School since 1989. Mr. Milano, age 44, has
been a director of the Corporation since July 1996
and the Vice Chairman of the Board of Trustees of
the College since 1992.
Dr. Jennie D. Seaton....... Member -- Executive Committee. Dr. Seaton is
retired and was an Assistant Dean of Virginia
Commonwealth University from 1975 to 1994. Dr.
Seaton, age 67, has been a director of the
Corporation since July 1996 and has been a member
of the Board of Trustees of the College since 1990.
Roland Carey............... Member -- Audit Committee. Instructor, Carl
Sandburg School, for more than five years. Mr.
Carey, age 57, has been a director of the
Corporation since July 1996 and a member of the
Board of Trustees of the College since 1990.
2
<PAGE> 6
Donald T. Benson........... Member -- Compensation Committee. Vice President,
Human Resources, of Aetna Life insurance Company
since 1992. From 1976 to 1992, Mr. Benson was
Senior Vice resident, Human Resources, of
Connecticut General Insurance Corp. (Cigna). Mr.
Benson, age 53, has been a director of the
Corporation since July 1996 and has been a member
of the Board of Trustees of the College since 1992.
G. Thomas Waite, III....... Member -- Audit Committee. Treasurer, Humane
Society of the United States, since 1993. In 1992,
Mr. Waite was the Director of Commercial Management
of The National Housing Partnership. As a result of
the insolvency of a real estate partnership in
which Mr. Waite served as a general partner, Mr.
Waite filed for protection from creditors under
Chapter 11 of the Federal Bankruptcy Code in 1993,
which subsequently was converted to a Chapter 7
filing in 1993. Mr. Waite, age 45, has been a
director of the Corporation since July 1996 and has
been a member of the Board of Trustees of the
College since 1994.
Dr. Donald Stoddard........ Member -- Audit Committee. Professor, Department of
English, Anne Arundel Community College, since
1990. From 1979 to 1990, Dr. Stoddard was the
Coordinator, Collegiate Institutional Approval, of
the Maryland Higher Education Commission. Dr.
Stoddard, age 60, has been a director of the
Corporation since July 1996 and has been a member
of the Board of Trustees of the College since 1995.
Dr. Charlotte Beason....... Member -- Compensation Committee. Nurse at the U.S.
Department of Veterans Affairs/Health Care Reform
Office, since 1992. Dr. Beason, age 49, has been a
director of the Corporation since July 1996 and has
been a member of the Board of Trustees of the
College since 1995.
BOARD COMMITTEES
The Board of Directors has established an Audit Committee, an Executive
Committee and a Compensation Committee and has no nominating committee.
Selection of nominees for the Board is made by the entire Board of Directors.
The Audit Committee is composed of Messrs. Carey and Waite and Dr.
Stoddard. The Audit Committee is responsible for reviewing the internal
accounting procedures of the Corporation and the results and scope of the audit
and other services provided by the Corporation's independent auditors,
consulting with the Corporation's independent auditors and recommending the
appointment of independent auditors to the Board of Directors. The Audit
Committee met once during the year ended December 31, 1996; each member of the
Audit Committee attended this meeting.
The Compensation Committee is composed of Messrs. Milano and Benson and Dr.
Beason. The Compensation Committee has the authority and performs all of the
duties related to the compensation of management of the Corporation, including
determining policies and practices, changes in compensation and benefits for
management, determination of employee benefits and all other matters relating to
employee compensation, including matters relating to the administration of the
Corporation's 1996 Stock Option Plan (the "Option Plan"). The Compensation
Committee met once during the year ended December 31, 1996; each member of the
Compensation Committee attended this meeting.
ATTENDANCE AT MEETINGS
During the year ended December 31, 1996, the Board of Directors held two
meetings, which were attended by all of the directors.
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<PAGE> 7
DIRECTORS' FEES
Directors are reimbursed for expenses incurred in connection with their
attendance at Board and Committee meetings, but currently receive no
compensation for serving as directors. Non-employee directors have also received
options to purchase an aggregate of 39,000 shares of Common Stock under the
Option Plan.
REPORTS OF BENEFICIAL OWNERSHIP
The Securities Exchange Act of 1934 requires the Corporation's directors,
executive officers and 10% stockholders to file reports of beneficial ownership
of equity securities of the Corporation and to furnish copies of such reports to
the Corporation. Based on a review of such reports, the Corporation believes
that, during the fiscal year ended December 31, 1996, all such filing
requirements were met, except that Mr. Waite and Dr. Beason each were late in
filing Forms 5 for the year ended December 31, 1996.
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<PAGE> 8
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information regarding the ownership
of Common Stock as of March 15, 1997, by each person known by the Corporation to
be the beneficial owner of more than five percent (5%) of the outstanding shares
of Common Stock, each director of the Corporation, and all executive officers
and directors as a group. The information presented in the table is based upon
the most recent filings with the Securities and Exchange Commission by such
persons or upon information otherwise provided by such persons to the
Corporation.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAMES OF BENEFICIAL OWNERS OWNED(1) PERCENTAGE OWNED
- ------------------------------------------------------------- ------------------- ----------------
<S> <C> <C>
Ron K. Bailey and Beverly W. Bailey.......................... 5,900,000 62.4%
Putnam Investments, Inc.(2).................................. 975,679 10.3
One Post Office Square
Boston, Massachusetts 02109
Stanley G. Elmore............................................ 0 *
Todd A. Milano............................................... 4,540 *
Jennie D. Seaton............................................. 0 *
Roland Carey................................................. 0 *
Donald T. Benson............................................. 600 *
G. Thomas Waite, III......................................... 0 *
Donald Stoddard.............................................. 300 *
Charlotte Beason............................................. 0 *
All directors and executive officers as a group (10
persons)................................................... 5,905,440 62.5%
</TABLE>
- ---------------
* Less than one percent
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of Common Stock subject
to options or warrants currently exercisable or exercisable within 60 days
are deemed outstanding for purposes of computing the percentage ownership of
the person holding such option or warrant but are not deemed outstanding for
purposes of computing the percentage ownership of any other person. Except
where indicated otherwise, and subject to community property laws where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(2) Based on a Schedule 13G filed with the Securities and Exchange Commission on
January 31, 1997. These securities are owned by various institutional
investors that are clients of investment adviser subsidiaries of Putnam
Investments, Inc. ("PI"), a wholly-owned subsidiary of Marsh & McClennan
Companies, Inc. ("M&MC"). For purposes of reporting requirements of the
Securities Exchange Act of 1934, PI and M&MC are each deemed to be
beneficial owners of these securities; however, each of PI and M&MC
expressly disclaims beneficial ownership.
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<PAGE> 9
COMPENSATION
EXECUTIVE COMPENSATION
The following table sets forth annual and long-term compensation for the
fiscal years ended December 31, 1994, 1995 and 1996 for services in all
capacities to the Corporation of the Chief Executive Officer. None of the
Corporation's other executive officers received a total annual salary and bonus
in excess of $100,000 during such periods.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
--------------------------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS/SAR'S COMPENSATION(2)
---------- ---- -------- ---------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Ron K. Bailey...................... 1995 $150,000 $6,175,000(1) -- $ 3,181
President 1996 $150,000 -- -- $ 3,138
</TABLE>
- ---------------
(1) The bonus was withheld for payments by Mr. Bailey in respect of income taxes
on undistributed S Corporation income of the College. Other compensation in
the form of perquisites and other personal benefits has been omitted because
the aggregate amount of such perquisites and other personal benefits
constituted less than $50,000 or 10% or Mr. Bailey's total annual salary and
bonus.
(2) Reflects (i) $3,043 and $3,000 in matching contributions made by the College
to the College's 401(k) plan for Mr. Bailey in 1995 and 1996, respectively,
and (ii) $138 in premiums paid by the College for life insurance for Mr.
Bailey in each of 1995 and 1996.
OPTION GRANTS
The Option Plan was adopted in July 1996. There were no options granted to
the Chief Executive Officer during the year ended December 31, 1996.
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<PAGE> 10
PERFORMANCE GRAPH
The following performance graph compares the Corporation's cumulative
stockholder return on its Common Stock since the Corporation's initial public
offering on July 25, 1996 with the S&P 500 Composite Index and a self-determined
peer group consisting of Apollo Group Inc., ITT Educational Services Inc., Devry
Inc. and Whitman Education Group Inc. At present there is no comparative index
for the education industry. Although the Securities and Exchange Commission
("SEC") requires the Corporation to present such a graph for a five-year period,
the Common Stock has been publicly traded only since July 25, 1996 and, as a
result, the following graph commences as of such date. This graph is not deemed
to be "soliciting material" or to be filed with the SEC or subject to the SEC's
proxy rules or to the liabilities of Section 18 of the Securities Act of 1934
("1934 Act"), and the graph shall not be deemed to be incorporated by reference
into any prior or subsequent filing by the Corporation under the Securities Act
of 1933 or the 1934 Act.
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Company Index Market Index Peer Index
<S> <C> <C> <C>
07/29/96 100.000 100.000 100.000
07/31/96 101.163 101.385 104.658
08/30/96 145.349 103.611 102.989
09/30/96 152.326 109.417 104.758
10/31/96 179.753 112.420 109.523
11/29/96 210.101 121.009 97.713
12/31/96 215.354 118.622 117.163
</TABLE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors has furnished the
following report on its policies with respect to the compensation of executive
officers. The report is not deemed to be "soliciting material" or to be "filed"
with the SEC or subject to the SEC's proxy rules or to the liabilities of
Section 18 of the 1934 Act, and the report shall not be deemed to be
incorporated by reference into any prior or subsequent filing by the Corporation
under the Securities Act of 1993 or the 1934 Act.
The Corporation's Board of Directors established the Compensation Committee
in July 1996, and the Committee will determine and act upon compensation
decisions as described below in 1997 and future years. Decisions on compensation
of the Corporation's executives officers generally will be made by the
Compensation Committee of the Board of Directors. No member of the Compensation
Committee is an employee of the Corporation. During 1996, the Committee
consisted of Messrs. Milano and Benson and Dr. Beason. All decisions by the
Compensation Committee relating to the compensation of the Corporation's
executive officers will be reviewed by its full Board, except for decisions
concerning grants under the Option Plan, which will be made solely by the
Committee in order for the grants to satisfy certain requirements under the 1934
Act.
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<PAGE> 11
Compensation Policies Toward Executive Officers
The Compensation Committee believes that the Corporation's executive
compensation policies and programs serve the interests of the Corporation and
its stockholders. The Compensation Committee's executive compensation policies
are intended to provide competitive levels of compensation that reflect the
Corporation's annual and long-term performance goals, reward superior corporate
performance, recognize individual initiative and achievements, and assist the
Corporation in attracting and retaining qualified executives. Compensation
levels are based on a number of factors, including a comparison of compensation
levels with other educational institutions. The Board of Directors and the
Compensation Committee also believe that longer-term incentives are appropriate
to motivate and retain key personnel and that stock ownership by management is
beneficial in aligning management's and stockholders' interests in the
enhancement of stockholder value.
Long-Term Stock Option Incentives. The Option Plan provides for the grant
of options that are intended to qualify as "incentive stock options" under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code") to
full time employees as well as the grant of non-qualifying options to directors
and employees of the Corporation. The Option Plan authorizes the issuance of up
to 1,000,000 shares of Common Stock pursuant to options granted under the Option
Plan (subject to anti-dilution adjustments in the event of a stock split,
recapitalization or similar transaction). The Compensation Committee of the
Board of Directors administers the Option Plan.
The option exercise price for incentive stock options granted under the
Option Plan may not be less than 100% of the fair market value of the shares
granted on the date of grant of the option (or 110% in the case of an incentive
stock option granted to an optionee beneficially owning more than 10% of the
outstanding shares). The option exercise price for non-incentive stock options
granted under the Plan may not be less than par value of the shares on the date
of grant of the option. The maximum option term is 10 years (or five years in
the case of an incentive stock option granted to an optionee beneficially owning
more than 10% of the outstanding shares). Options may be exercised at any time
after grant, except as otherwise provided in the particular option agreement.
Options covering no more than 500,000 shares may be granted to any officer or
other employee during the term of the Option Plan. There is also a $100,000
limit on the value of shares granted (determined at the time of grant) covered
by incentive stock options that first become exercisable by an optionee in any
calendar year.
Payment for shares of Common Stock purchased under the Option Plan may be
made either in cash or, if permitted by the particular option agreement, by (i)
exchanging Common Stock with a fair market value equal to the total option
exercise price or (ii) by authorizing the Corporation to withhold whole shares
then issuable upon exercise of the option with a fair market value equal to the
total option exercise price, and cash for any difference. Options may, if
permitted by the particular option agreement, be exercised by directing that
certificates for the shares purchased be delivered to a licensed broker as agent
for the optionee, provided that the broker tenders to the Corporation cash or
cash equivalents equal to the option exercise price plus the amount of any taxes
that the Corporation may be required to withhold in connection with the exercise
of the option.
Options granted under the Option Plan are not transferable and may be
exercised only by the optionee during his or her lifetime. If any optionee's
employment with the Corporation terminates by reason of death or permanent and
total disability, the optionee's options, whether or not then exercisable, may
be exercised within one year after such death or disability unless otherwise
provided in the option agreement (but not later than the date the option would
otherwise expire). If the optionee's employment terminates for any reason other
than death or disability, options held by such optionee terminate upon such
termination unless otherwise provided in the option agreement or approved by the
Compensation Committee (but not later than the date the option would otherwise
expire). The Compensation Committee may extend the period during which the
option may be exercised (but not later than the date the option would otherwise
expire) by so providing in the option agreement. The options will terminate
within a specified time after the optionee's termination of employment with the
Corporation.
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<PAGE> 12
Any options forfeited pursuant to the vesting provisions of the Option Plan
(or other limitations on exercise described above) will again be available for
award under the Option Plan.
The Option Plan provides for formula grants of options to non-employee
directors (an "Eligible Director"). At the time of the Corporation's initial
public offering, each Eligible Director was granted an initial option to
purchase a number of shares of Common Stock equal to 1,000 times the number of
years the Eligible Director served as a trustee of the College. Each Eligible
Director will also be granted an additional option to purchase 1,000 shares of
Common Stock immediately after each of the subsequent annual meetings of the
Corporation's stockholders if the Eligible Director continues to be an Eligible
Director. Options granted to Eligible Directors under the Option Plan may be
exercised with respect to the shares subject to such option one year after the
option is granted. All options expire five years after the date of grant.
Upon any dissolution or liquidation of the Corporation, or upon a
reorganization, merger or consolidation in which the Corporation is not the
surviving corporation, or upon the sale of all or substantially all of the
assets of the Corporation to another corporation, or upon any transaction
approved by the Board of Directors which results in any person or entity owning
80% or more of the total combined voting power of all classes of stock of the
Corporation, the Option Plan and the options issued thereunder will terminate,
unless provision is made in connection with such transaction for the
continuation of this Option Plan and/or the assumption of the options or for the
substitution for such options of new options covering the stock of a successor
corporation or a parent or subsidiary thereof, with appropriate adjustments as
to the number and kinds of shares and the per share exercise price. In the event
of such termination, all outstanding options will be exercisable in full during
such period immediately prior to the occurrence of such termination as the Board
of Directors in its discretion will determine.
The Board of Directors may amend the Option Plan with respect to shares of
Common Stock as to which options have not been granted. However, the
Corporation's stockholders must approve any amendment that would (i) change the
requirements as to eligibility to receive options; (ii) materially increase the
benefits accruing to participants under the Option Plan; or (iii) materially
increase the number of shares of Common Stock that may be sold pursuant to
options granted under the Option Plan (except for adjustments upon changes in
capitalization).
The Board of Directors at any time may terminate or suspend the Plan.
Unless previously terminated, this Plan will terminate automatically on July 24,
2006, the tenth anniversary of the date of adoption of the Option Plan by the
Board of Directors. No termination, suspension or amendment of this Plan may,
without the consent of the optionee to whom an option has been granted,
adversely affect the rights of the holder of the option.
Federal Income Tax Consequences of the Stock Option Plan. The grant of an
option is not a taxable event for the optionee or the Corporation. With respect
to "incentive stock options," an optionee will not recognize taxable income upon
grant or exercise of an incentive option, and any gain realized upon a
disposition of shares received pursuant to the exercise of an incentive option
will be taxed as long-term capital gain if the optionee holds the shares for at
least two years after the date of grant and for one year after the date of
exercise. However, the excess of the fair market value of the shares of Common
Stock subject to an incentive option on the exercise date over the option
exercise price will be included in the optionee's alternative minimum taxable
income in the year of exercise (except that, if the optionee is subject to
certain securities law restrictions, the determination of the amount included in
alternative minimum taxable income may be delayed, unless the optionee elects
within 30 days following exercise to have income determined without regard to
such restrictions) for purposes of the alternative minimum tax. This excess
increases the optionee's basis in the Common Stock for purposes of the
alternative minimum tax but not for purposes of the regular income tax. An
optionee may be entitled to a credit against regular tax liability in future
years for minimum taxes paid with respect to the exercise of incentive options
(e.g., for a year in which the shares are sold at a gain). The Corporation and
its subsidiaries will not be entitled to any business expense deduction with
respect to the grant or exercise of an incentive option, except as discussed
below.
For the exercise of an incentive option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of the Corporation or a
subsidiary from the date the option is granted through a date
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<PAGE> 13
within three months before the date of exercise. In the case of an optionee who
is disabled, this three-month period is extended to one year. In the case of an
employee who dies, the three-month period and the holding period for Common
Stock received pursuant to the exercise of the option are waived.
If all of the requirements for incentive option treatment are met except
for the special holding period rules set forth above, the optionee will
recognize the ordinary income upon the disposition of the Common Stock in an
amount equal to the excess of the fair market value of the shares at the time
the option was exercised over the option exercise price. However, if the
optionee was subject to certain restrictions under the securities laws at the
time the option was exercised, the measurement date may be delayed, unless the
optionee has made a special tax election within 30 days after the date of
exercise to have taxable income determined without regard to such restrictions.
The balance of the realized gain, if any, will be long- or short-term capital
gain, depending upon whether or not the shares of Common Stock were sold more
than one year after the option was exercised. If the optionee sells the shares
prior to the satisfaction of the holding period rules but at a price below the
fair market value of the Common Stock at the time the option was exercised (or
other applicable measurement date), the amount of ordinary income (and the
amount included in alternative minimum taxable income, if the sale occurs during
the same year as the option was exercised) will be limited to the excess of the
amount realized on the sale over the option exercise price. If the Corporation
complies with applicable reporting (if any) and other requirements, it will be
allowed a business expense deduction to the extent the optionee recognizes
ordinary income.
If, pursuant to an option agreement, an optionee exercises an incentive
option by tendering shares with a fair market value equal to part or all of the
option exercise price, the exchange of shares of Common Stock will be treated as
a nontaxable exchange (except that this treatment would not apply if the
optionee had acquired the shares being transferred pursuant to the exercise of
an incentive option and had not satisfied the special holding period
requirements summarized above). If the exercise is treated as a tax free
exchange, the optionee would have no taxable income from the exchange and
exercise (other than minimum taxable income as discussed above) and the tax
basis of the shares exchanged would be treated as the substituted basis for the
shares received. These rules would not apply if the optionee used shares of
Common Stock received pursuant to the exercise of an incentive option (or
another statutory option) as to which the optionee had not satisfied the
applicable holding period requirement. In that case, the exchange would be
treated as a taxable disqualifying disposition of the exchanged shares, with the
result that the excess of the fair market value of the shares tendered over the
optionee's basis in the shares would be taxable.
Upon exercising a non-qualifying (i.e. non-incentive) option, an optionee
will recognize ordinary income in an amount equal to the difference between the
exercise price and the fair market value of the shares on the date of exercise
(except that, if the optionee is subject to certain restrictions imposed by the
securities laws, the measurement date may be delayed, unless the optionee makes
a special tax election within 30 days after exercise to have income determined
without regard to the restrictions). If the Corporation complies with applicable
reporting requirements, it will be entitled to a business expense deduction in
the same amount. Upon a subsequent sale or exchange of shares of Common Stock
acquired pursuant to the exercise of a non-incentive option, the optionee will
have taxable gain or loss, measured by the difference between the amount
realized on the disposition and the tax basis of the shares (generally, the
amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If, pursuant to an option agreement, the optionee surrenders Common Stock
in payment of part or all of the exercise price for non-qualifying options, no
gain or loss will be recognized with respect to the shares surrendered
(regardless of whether the shares were acquired pursuant to the exercise of an
incentive option) and the optionee will be treated as receiving an equivalent
number of shares pursuant to the exercise of the option in a nontaxable
exchange. The basis of the shares surrendered will be treated as the substituted
tax basis for an equivalent number of option shares received and the new shares
will be treated as having been held for the same holding period as had expired
with respect to the transferred shares. However; the fair market value of any
shares of Common Stock received in excess of the number of shares surrendered
(i.e., the difference between the aggregate option exercise price and the
aggregate fair market value of the shares received pursuant to the exercise of
the option) will be taxed as ordinary income. Under current federal income tax
law, for 1993 and subsequent years, the highest tax rate on ordinary income is
39.6% and long-term
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<PAGE> 14
capital gains are subject to a maximum tax rate of 28%. Gain on a sale of stock
acquired as a consequence of the exercise of an option should qualify as
long-term if the stock has been held for more than one year (after exercise).
Because of certain provisions in the law relating to the "phase out" of personal
exemptions and certain limitations on itemized deductions, the federal income
tax consequences to a particular taxpayer of receiving additional amounts of
ordinary income or capital gain may be greater than would be indicated by
application of the foregoing tax rates to the additional amount of income or
gain.
Other Compensation Plans. The Corporation maintains a retirement plan (the
"401(k) Plan") intended to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code. The 401(k) Plan is a defined contribution plan that
covers all full-time employees of the Corporation of at least 21 years of age,
employed by the Corporation for at least one year. Employees may contribute up
to 10% of their annual wages (subject to an annual limit prescribed by the Code)
as pretax, salary deferral contributions. The Corporation may, in its
discretion, match employee contributions up to a maximum of 15% of annual wages.
Benefits. Benefits offered to key executives are largely those that are
offered to the general employee population, such as group health and life
insurance coverage and participation in the Corporation's 401(k) Plan.
Mr. Bailey's Compensation
Mr. Bailey is paid an annual salary of $150,000 per year pursuant to the
terms of his employment agreement. See "Employment Agreements."
Submitted by the Members of the Compensation Committee:
Donald T. Benson
Todd A. Milano
Charlotte Beason
EMPLOYMENT AGREEMENTS
Mr. Bailey and the College entered into an Employment Agreement in July
1996, which provides that Mr. Bailey will serve as President and Chief Executive
Officer of the College. For his services, Mr. Bailey is entitled to receive an
annual salary of $150,000. According to the terms of the Employment Agreement,
Mr. Bailey's salary for successive years may be increased at the discretion of
the College's Board of Trustees. The College does not currently contemplate
payment of bonuses to Mr. Bailey. Future bonuses, if any, paid to Mr. Bailey
will be awarded pursuant to guidelines approved by the Compensation Committee of
the Corporation's Board of Directors and will be at levels commensurate with any
bonuses paid to other executive officers. The agreement contains a covenant
restricting Mr. Bailey from competing with the College for three years after the
termination of employment.
The College also entered into an employment agreement with Mr. Harry T.
Wilkins, Chief Financial Officer of the Corporation, in July 1996. The
employment agreement contains a covenant restricting Mr. Wilkins from competing
with the College for three years after the termination of his employment.
CERTAIN TRANSACTIONS WITH MANAGEMENT
Lease of Campus Facilities
The Corporation has long-term noncancelable operating leases for eight of
its various campus locations. The rents on these leases are subject to an annual
increase based on a stipulated price index. Of the eight campus locations, five
of the campuses, including the Washington, D.C. campuses and three of the
Virginia campuses, were leased from corporations which are wholly-owned by Mr.
Bailey, the Corporation's President and majority stockholder. Rent paid to Mr.
Bailey under these five operating leases for the years ended December 31, 1994,
1995 and 1996 was $1,339,000, $1,896,000 and $2,279,000, respectively. Future
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<PAGE> 15
minimum rental commitments for all of the Corporation's eight leases and the
five campuses leased from Mr. Bailey as of December 31, 1996 was as follows (in
thousands):
<TABLE>
<CAPTION>
AMOUNT PAYABLE TO AN
AFFILIATE OF MR.
TOTAL LEASE BAILEY
COMMITMENTS INCLUDED IN TOTAL
----------- --------------------
<S> <C> <C>
1997.............. $ 3,153 $ 2,126
1998.............. 3,024 2,126
1999.............. 2,758 2,126
2000.............. 2,750 2,126
2001.............. 2,648 2,126
2002.............. 2,381 2,126
Thereafter........ 7,894 7,264
------- --------
$24,608 $ 20,020
======= ========
</TABLE>
Each of the leases with Mr. Bailey has a 10-year term expiring in May 2006.
The Corporation has the option under each lease to purchase at any time during
the term of the lease the related campus facility at its discretion at the fair
market value of such facility as determined by independent appraisers.
The Corporation may lease additional campus facilities from entities owned
or controlled by Mr. Bailey. Any such leases will have market terms as
determined by an independent appraiser and be subject to the approval by a
majority of independent directors.
Transactions with PRK Investments, Inc.
The College retained PRK Investments, Inc. ("PRK") to provide it with a
variety of services, including services related to computer equipment purchasing
and the College's compliance with the HEA and Department of Education
regulations applicable to Title IV Programs. Two-thirds of the PRK common stock
is owned by children of Ron K. Bailey, President and a director of the
Corporation. The College paid PRK approximately $257,000 for computer equipment
purchasing and related services in 1996. In addition, pursuant to a contract
with PRK, the College made monthly payments of $20,000 to PRK for Title IV
services from January 1, 1996 through May 15, 1996. Beginning May 16, 1996, the
computer equipment purchasing and related services performed by PRK for the
College, as well as the services related to Title IV Programs, are performed by
employees of the Corporation. The College provided PRK office space on a
rent-free basis in 1996 through May 15, 1996.
Transactions with Career Training Institute, Inc.
College faculty and other employees have received computer-related
instruction and training in other occupational skills from Career Training
Institute, Inc. ("CTI"). Prior to December 31, 1996, eighty percent of the CTI
common stock was owned by children of Ron K. Bailey, President and a director of
the Corporation. The College paid CTI approximately $199,000 for its services in
1996. Management believes that CTI provided such services to the College on
terms at least as favorable to the College as the College could obtain from
unaffiliated parties. The Corporation believes that the instruction provided by
CTI is not competitive with the current programs of the College.
Reorganization Transactions
On July 30, 1996, the Corporation completed an initial public offering of
its common stock. The Corporation sold 3,450,000 shares in the offering at a
price of $10 per share. Net proceeds to the Corporation were $31,313,000. Prior
to the closing of the offering, the Corporation exchanged 5,999,000 shares of
its common stock for 100% of the outstanding common stock of the College, which
was held jointly by Mr. and Mrs. Ron K. Bailey. Approximately $19,838,000 of the
net proceeds of the offering were paid to the Baileys as a distribution of
earnings on which they had previously paid income taxes during the period the
College was an S Corporation.
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<PAGE> 16
Contemporaneously with the closing of the initial public offering, the
Corporation acquired ELP at a purchase price of $1,060,000, ELP's net book
value. ELP was wholly owned by Mr. Ron K. Bailey, the Corporation's President
and a director of the Corporation.
PROPOSAL II
AMEND THE COMPANY'S ARTICLES OF INCORPORATION
The Board of Directors of the Corporation has approved, declares it
advisable and in the best interests of the Corporation and its stockholders, and
recommends that Article Fifth of the Corporation's Articles of Incorporation be
amended to increase the authorized shares of Common Stock from 20,000,000 to
50,000,000. The text of the Amendment is as follows:
FIFTH: The total number of shares of stock of all classes the
Corporation shall have authority to issue is Fifty-Five Million
(55,000,000) shares, having an aggregate par value of Five Hundred
and Fifty Thousand Dollars ($550,000) of which Fifty Million
(50,000,000) shares, par value of $.01 per share, amounting in
aggregate par value of Five Hundred Thousand Dollars ($500,000),
shall be Common Stock, and Five Million (5,000,000) shares, par
value $.01 per share, amounting in aggregate par value of Fifty
Thousand Dollars ($50,000), shall be Preferred Stock.
As of March 18, 1997, there were 9,450,000 shares of Common Stock
outstanding. In addition, as of March 18, 1997, options to purchase 646,674
shares were outstanding under the 1996 Stock Option Plan. Thus, at March 18,
1997, the Corporation had outstanding or reserved for issuance 10,096,674 shares
of Common Stock.
The authorization of an additional 30,000,000 shares of Common Stock would
give the Board the express authority, without further action of the
Corporation's stockholders, to issue such shares of Common Stock from time to
time as the Board deems necessary or advisable. The Board believes that having
the additional shares authorized and available for issuance will allow the
Corporation to have greater flexibility in considering potential future actions
involving the issuance of stock which may be desirable or necessary to
accommodate the Corporation's business plan, including capital raising
transactions. In addition, the Board believes it is necessary to have the
ability to issue such additional shares for general corporate purposes. Such
general corporate uses of the additional authorized shares of Common Stock may
include acquisition transactions, stock dividends, splits or distributions, and
distributions in connection with future issuance of Preferred Stock of the
Corporation, stock options or warrants. In any case, the additional shares of
Common Stock would be available for issuance by the Board without future action
by the stockholders, unless such action were specifically required by applicable
law or rules of any stock exchange on which the Corporation's securities may be
traded.
Although the proposed increase in the authorized capital stock of the
Corporation could be construed as having anti-takeover effects, neither the
Board nor management of the Corporation views this proposal in that perspective.
Nevertheless, the Corporation could use the additional shares to frustrate
persons seeking to effect a takeover or otherwise gain control of the
Corporation by, for example, privately placing shares to purchasers who might
side with the Board in opposing a hostile takeover bid. The Corporation is not
aware of any such hostile takeover bid at this time. Such uses of the Common
Stock could render more difficult or discourage an attempt to acquire control of
the Corporation, if such transactions were opposed by the Board. Further, an
issuance of additional shares by the Corporation could have the effect on the
potential realizable value of a stockholder's investment in the Corporation. In
the absence of a proportionate increase in the Corporation's earnings and book
value, an increase in the aggregate number of outstanding shares of Common Stock
would dilute the earnings per share and book value per share of all outstanding
shares of the Corporation's Common Stock. The foregoing factors, if reflected in
the price per share of Common Stock, could adversely affect the realizable value
of a stockholder's investment in the Corporation.
The affirmative vote of a majority of all shares of the Corporation's
Common Stock outstanding on the Record Date is required for approval of the
Amendment.
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<PAGE> 17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND THE
CORPORATION'S AMENDED AND RESTATED ARTICLES OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK FROM 20,000,000 SHARES TO 50,000,000
SHARES.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Coopers & Lybrand L.L.P. has acted as the
Corporation's independent public accountants for the fiscal year ended December
31, 1996. Representatives of Coopers & Lybrand L.L.P. are expected to be present
at the stockholders' meeting and will have an opportunity to make a statement if
they desire and to respond to appropriate questions.
STOCKHOLDER PROPOSALS
All stockholder proposals intended to be presented at the 1998 Annual
Meeting of Stockholders must be received by the Corporation no later than
December 30, 1997 and must otherwise comply with rules of the Securities and
Exchange Commission for inclusion in the Corporation's proxy statement and form
of proxy relating to the meeting.
OTHER MATTERS
The Corporation knows of no other matters to be presented for action at the
Annual Meeting other than those mentioned above. However, if any other matters
should properly come before the meeting, it is intended that the persons named
in the accompanying proxy card will vote on such matters in accordance with
their best judgment.
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<PAGE> 18
REVOCABLE PROXY
STRAYER EDUCATION, INC.
ANNUAL MEETING OF STOCKHOLDERS MAY 19, 1997
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder hereby appoints Ron K. Bailey, Harry T.
Wilkins and Glenda S. Hardison, or any of them, attorneys and proxies of the
undersigned, with full power of substitution and with authority in each of them
to act in the absence of the other, to vote and act for the undersigned at the
Annual Meeting of Stockholders of the Corporation to be held on Monday, May 19,
1997 at 10:00 a.m. (Eastern time) at the Hyatt Regency Crystal City, 2799
Jefferson Davis Highway, in Arlington, Virginia, and at any adjournments
thereof, in respect of all shares of the Common Stock of the Corporation which
the undersigned may be entitled to vote, on the following matters:
1. ELECTION OF NINE DIRECTORS BY ALL STOCKHOLDERS: -- Nominees:
Ron K. Bailey, Stanley G. Elmore, Todd A. Milano, Dr. Jennie
D. Seaton, Roland Carey, Donald T. Benson, G. Thomas Waite,
III, Dr. Donald Stoddard and Dr. Charlotte Beason
[ ] FOR
[ ] AGAINST
[ ] FOR ALL (except nominees written below)
--------------------------------------------------------------
2. AMENDMENT OF CHARTER: Approval of an amendment to the
Corporation's Amended and Restated Articles of Incorporation
increasing the authorized number of shares of Common Stock
from 20,000,000 to 50,000,000:
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. The proxies are authorized to vote in their discretion on any
other matters which may properly come before the Annual
Meeting to the extent set forth in the proxy statement.
(Continued and to be dated and signed on reverse side.)
<PAGE> 19
(continued from other side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. HOWEVER, IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND FOR THE PROPOSED AMENDMENT TO THE
CORPORATION'S AMENDED AND RESTATED ARTICLES OF INCORPORATION INCREASING THE
NUMBER OF AUTHORIZED NUMBER OF SHARES OF COMMON STOCK FROM 20,000,000 TO
50,000,000, AND IN THE BEST DISCRETION OF THE PROXY HOLDERS AS TO ANY OTHER
MATTERS.
The undersigned hereby acknowledges prior receipt of a copy of the
Notice of Annual Meeting of Stockholders and proxy statement dated April 11,
1997, and hereby revokes any proxy or proxies heretofore given. This Proxy may
be revoked at any time before it is voted by delivering to the Secretary of the
Corporation either a written revocation of proxy or a duly executed proxy
bearing a later date, or by appearing at the Annual Meeting and voting in
person.
If you receive more than one proxy card, please sign and return all
cards in the accompanying envelope.
[ ] I PLAN TO ATTEND THE MAY 19, 1997 ANNUAL STOCKHOLDERS MEETING
Date: _________________________ , 1997.
____________________________________
Signature of Stockholder or Authorized
Representative
Please date and sign exactly as name
appears hereon. Each executor,
administrator, trustee, guardian,
attorney-in-fact and other fiduciary
should sign and indicate his or her
full title. In the case of stock
ownership in the name of two or more
persons, both persons should sign.
PLEASE MARK, DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY TO ENSURE A QUORUM
AT THE MEETING. IT IS IMPORTANT WHETHER YOU OWN FEW OR MANY SHARES. DELAY IN
RETURNING YOUR PROXY MAY SUBJECT THE CORPORATION TO ADDITIONAL EXPENSE.
2
